It started with the above press release.
Then the company, a junior miner called Ethiopian Potash Corp., responded with this one.
It is highly irregular for an individual to issue his own press release through Canada Newswire when departing a company, as Bruce C. did this week. Most ominously, he said that he is involved with a separate firm (G&B Central African Resources Ltd.) that owns potash permits in Ethiopia and gave Ethiopian Potash an option to acquire an interest in them. That raises questions about title on the company’s assets.
Ethiopian Potash referred to Mr. Bruce C. whole statement as a “non-material event,” but it has caused some obvious confusion for investors, who are left wondering about the miner’s relationship with G&B.
A quick check of G&B’s website reveals nothing — the site promises that it will go live in September 2008. It seems that deadline was missed.
So what is really going on here? Dundee Capital Markets analyst Richard Kelertas is not sure, but he said that it is indicative of Ethiopian Potash’s “highly disordered internal state.”
“The issuance of an unauthorized press release demonstrates a lack of control which we believe the company cannot afford at this stage in the game,” Mr. Kelertas wrote in a note.
“Furthermore, we are concerned about the sketchy details available regarding the company’s association with G&B. The lack of clarity and information on G&B and its obligations in terms of potash permits to [Ethiopian Potash] adds another negative dimension to the [company's] project and further supports our negative stance on the company.”
Mr. Kelertas maintained a sell rating on Ethiopian Potash shares. He recommends that investors move into Allana Potash Corp. instead, a rival potash play in Ethiopia that he believes has better prospects.